Ruchi Soya Up 23% In 5 Days; Here’s What the Chart is Showing

  • Stock Market Analysis
  • Editors Pick

Generally, stocks such as Ruchi Soya (NS: RCSY ) does not come on investors’ radar as the stock is highly volatile and less liquid. At the start of the year, the stock registered a 20-day average volume of a mere 12.98K shares which makes investors steer clear of such stocks.

However, recently, Ruchi Soya shares have seen a sudden spike in trading activity after the company announced to buy Patanjali’s food retail business for a bargain of INR 690 crore. Investors’ joy amid the acquisition news is evident in the company’s share price as well.

Ruchi Soya

Image Description: Daily chart of Ruchi Soya with volume bars at the bottom

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The share price of Ruchi Soya has surged by over 23% in the last five trading sessions, to the last traded price of INR 1,223.1 (as of 12:20 PM IST, 20 May 2022). Increased investors’ participation can also be witnessed by looking at the volume spikes on the above chart. To put it in perspective, the 20-day average volume has bolstered to 8.2 million shares per day, that’s a whopping 6,300% increase in the average volume since the beginning of the year.

Price action is also looking strong on the charts with the stock moving rapidly towards its 52-week high of INR 1,376.7, marked in June last year. Although there has been a visible trend on the upside, it would not be easy for investors to ride through the heightened volatility.

Ruchi Soya price

Image Description: Daily chart of Ruchi Soya with ATR at the bottom

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A surge in volatility, especially after the Ukraine-Russia war has made it increasingly difficult for investors to hold on to their holdings. To gauge the current volatility of the stock, let us have a quick look at the Average True Range or simple, ATR (daily, 14). ATR on the daily chart is showing a reading of around 81, which is around the highest in the last few years. In other words, a value of 81 means that the stock has moved INR 81 per day (on average) for the last 14 days. That’s about 6.6% of the current market price.

If the stock closes around the current level today, it will be the highest weekly close on the charts since June 2021, which in itself is a very strong bullish indicator. Although a 13% rally required to reach its 52-week high might not seem much of a big deal, especially when the stock is in strong momentum, high volatility might become a hindrance. Therefore, before making an investment decision, investors must be prepared to tackle volatility in the stock.

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